I just got around to checking out a mailing list devoted to Futarchy. It looks interesting enough that I expect to post a number of messages to it over the next few weeks. But I have some concerns that is focused too much on problems associated with the final stages on the path to a pure Futarchy rather than on what I see as the more valuable goal of implementing an impure system that involves voters relying heavily on market predictions (which I see as a necessary step to take before people will seriously consider pure Futarchy).
I’m in the process of writing comments on the book Predictocracy, probably too many for one post, and I expect I’ll post some of them only on the futarchy_discuss list.
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Book review: Seeing Red: A Study in Consciousness (Mind/Brain/Behavior Initiative) by Nicholas Humphrey,
This book provides a clear and simple description of phenomena that are often described as qualia, and a good guess about how and why they might have evolved as convenient ways for one part of a brain to get useful information from other parts. It uses examples of blindsight to clarify the difference between using sensory input and being aware of that input.
I liked the description of consciousness as being “temporally thick” rather than being about an instantaneous “now”, suggesting that it includes pieces of short-term memory and possibly predictions about the next few seconds.
The book won’t stop people from claiming that there’s still something mysterious about qualia, but it will make it hard for them to claim that they have a well-posed question that hasn’t been answered. It avoids most debates over meanings of words by usually sticking to simpler and less controversial words than qualia, and only using the word consciousness in ways that are relatively uncontroversial.
The book is short and readable, yet the important parts of it are concise enough that it could be adequately expressed in a shorter essay.
Since mideast military policy appears to be one of the most important issues in this presidential campaign, I’m mentioning the best criticisms I’ve seen of the leading candidates’ plans:
Obama Imitates Olmert points out the problems with expecting air power to help the U.S. retain some control over Iraq (i.e. if Obama will withdraw troops from Iraq, he ought to give up hope of influencing whatever violence is left behind).
The amount of money that the U.S. has apparently needed to pay the enemy to stop fighting raises serious doubts about McCain’s hope that Iraq is being stabilized in any sustainable way (HT David Brin).
Sen. John Barrasso (R-WY) has introduced a bill to create prizes for carbon sequestration:
This is how it would work. There would be four different levels of prizes. The first level award would go to the public or private entity that could first demonstrate a design for a successful technology that could remove and permanently sequester greenhouse gases. Second, there would be a prize for a lab scale demonstration project of the technology that accomplishes the same thing. Third, there would be an award for demonstrating the technology to remove and permanently sequester greenhouse gases that is operational at a larger, working model scale. Finally, there would be an award for whoever could demonstrate the technology to remove and permanently sequester greenhouse gases on a commercially viable scale.
It sounds like many important details would be decided by a federal commission. The prizes could have many of the promises and drawbacks of Virgin Earth Challenge.
The first three levels of the prizes appear to create incentives to create designs with little regard for commercial feasibility. If those prizes are large, they might end up rewarding technologies that are too expensive to be worth using. Small prizes might have little trouble with this due to inventors not wanting to spend much money to win the prizes, but I’d still have concerns about inventors paying little attention to reliability and maintenance costs. The fourth level appears more promising.
Bureaucrats are likely to put more effort into clarifying prize rules that the Virgin Earth group did. But it’s unclear whether any approaches that a government agency is likely to recommend will do a decent job of translating the “commercially viable” goal into a clear enough set of rules that inventors will be able to predict how the prizes will be awarded.
My advice for the commission, should it be created, is that it tie the prizes to actual amounts of carbon removed from the atmosphere over some pre-specified period, or to estimates of those amounts derived from a prediction market.
(HT Jim Manzi).
The Politimetrics provides implied probabilities of Clinton or Obama winning in November if they get the nomination, derived from Intrade prices. I’m surprised that it’s been showing recently that the difference in their electabilities has been mostly zero, with occasional indications that Clinton is slightly more electable. Most other sources of information appear to suggest that Obama has more support than Clinton among independents and Republicans.
I just did a little trading to help move the market toward showing Obama as more electable by replacing my small bet against Clinton being nominated with a bet against her becoming president, but the amount I’m willing to trade was small enough that the markets moved in the opposite direction (i.e. showed increased Clinton electability).
What could cause the markets to indicate knowledge that conflicts with what I expect?
It could be that several limitations of Intrade impair market efficiency, such as not making it easy to see what those of us who have noticed the Politimetrics site see, or having margin requirements that are not conducive to exploiting inefficiencies of this nature (even if I were more confident that the market is wrong, the expected return on investment isn’t enough to persuade me to make large trades).
It could be that Obama is sufficiently unusual that there’s more uncertainty in how he will do, so that while the most likely result is that he’d get more votes than Clinton would, there’s a greater chance of a negative surprise with him.
It could be that Clinton is expected to be sufficiently vicious if she’s losing that she would hurt Obama before giving up.
But the history shown on the Politimetrics site has swings that seem unexplained by these guesses.
Book review: Poverty and Discrimination by Kevin Lang.
This book is designed to make you feel less sure of your knowledge, and it succeeds in that goal. That’s a worthy accomplishment, although it provides much less satisfaction than a book that provides a grand vision for solving problems would. At some abstract intellectual level I liked the book, but my gut feelings often told me that reading the book was unrewarding work that I shouldn’t do unless it was assigned reading for a course I needed.
The book will dissatisfy anyone who wants to view politics as a fight between good and evil. For many issues such as the minimum wage, he provides strong arguments that the effects are small enough that we should doubt whether the issue is worth fighting about.
He gives good explanations of why it’s hard to even have clear concepts of poverty and discrimination by providing examples of how seemingly trivial or unobservable differences can create results that our intuitions say are important to our moral rules.
He provides clear evidence that some discrimination still exists, and then thoroughly explains why there’s large uncertainty about how harmful it is. He presents one moderately unrealistic model in which discrimination is common but doesn’t affect wages. Then he presents a somewhat more realistic model in which a tiny bit of discrimination produces large wage differences. But those wage differences may overstate the harm done, because they’re partly due to minorities spending less on education and to women pursuing careers in lower risk occupations or careers which allow more flexibility to take time off.
There are only a handful of places where I doubted his objectivity.
He reports one study showing evidence of racial discrimination in home loans, but fails to mention any of the contrary evidence such as the Anderson and Vanderhoff paper showing higher marginal default rates for blacks.
The final few pages on policy implications seem poorly thought out compared to the rest of the book (he says that’s the least important chapter of the book). He claims that income taxes on the bottom quintile can be reduced to zero by a 10% increase on the top quintile, but that claim depends on assumptions about how reported income changes in response to tax increases. He doesn’t indicate what assumptions his claim depends on.
He claims “The high rate of incarceration in the United States and the high level of inequality are related.” He gives a plausible theory about why inequality causes the wealthy in some countries to spend a lot protecting their wealth from the poor, but provides no evidence connecting that theory to U.S. incarceration rates.
Early this week, the Federal Reserve Board lowered interest rates at an unexpected time by a surprisingly large amount.
I see three possible explanations, which I think are about equally likely.
- The Fed has evidence that the economy is slowing more than markets have realized.
- The Fed has evidence that some big financial institutions have troubles that are endangering the careers of some influential people, and is bailing out those institutions in hopes that those people will use their influence to enhance the job security of the people in charge of the Fed.
- Bernanke isn’t interested in the kind of publicity he can get by maximizing the total number of rate cuts. He realizes that a steady, predictable series of small rate cuts doesn’t stimulate the economy as well as cutting rates far enough that it isn’t easy to predict that more rate cuts will be needed (for one thing, making further rate cuts predictable creates incentives to postpone borrowing to when rates are lower). If that’s what’s happening, it’s not going to work as well as he would like this time, because the markets think the Fed is following the predictable rate cut strategy that gives them publicity for doing something at the time that the average person is most concerned about recession.
In related news, Singapore has a system which is designed to stabilize the economy rather than to provide politicians with opportunities to claim credit for doing something about the economy.
China is imposing widespread price controls and suffering power shortages which hinder production. If China were like the U.S., I’d say it’s trying to recreate the experience the U.S. had in the early 1970s. But the way Chinese politics work, the central government probably will allow local authorities to use a lot of discretion in enforcing the price controls, so the price controls will probably only produce shortages in a few industries that are dominated by large state-owned firms.
Politimetrics (associated with the Westminster Business School) has sponsored some additional Intrade contracts which will provide information about the impact of the presidential election on the country if they ever get enough liquidity. So far, there’s been no sign that much liquidity will exist.
One reason I (and presumably other traders) haven’t placed many orders is that the contracts deal with individual candidates. Since the value of the new contracts should fluctuate with the probability of the relevant candidate’s winning, and those fluctuations are currently much larger than any other factor affecting the prices, trading them would require any trader who doesn’t accept the market price to frequently monitor the prices of the underlying contracts. Nobody wants to do that unless the contracts already have significant volume.
Even if they had some liquidity, there’s a good deal of risk that the long-shot bias which appears to be common on Intrade would limit my confidence in the value of the information provided by those prices for all but the two or three candidates who are most likely to win in November (i.e. I’d probably believe what they said about Clinton relative to Obama, but I’d doubt they would be useful for voters in Republican primaries).
When it becomes clear who will win each party’s nomination, these problems will be reduced, and I’ll probably place a moderate number of orders on some of these contracts.
It should be possible to design a better user interface for decision markets of this nature so that users could place orders purely on the probable impact of a candidate’s election. Shock response futures come closer to doing that than contracts of the form “X wins and Y happens”, but can probably only indicate the direction of the impact.
I’ve created web pages at https://bayesianinvestor.com/amm/implied.html and https://bayesianinvestor.com/amm/implied4.html (which are currently being updated 4 times a day) which show implied prices (i.e. the price of the conditional contract as a percent of the price of the underlying candidate’s contract) that ought to represent what the markets think the probable effects would be if that candidate wins. Ideally traders could place orders expressed in terms of those implied prices, but that’s nontrivial to implement, and unlikely to happen unless someone pays Intrade a fair amount to create.
I’ve commented on Jed Christiansen’s blog about why I doubt the conditional contracts I’m subsidizing have had enough trading yet to produce valuable information. But the trends suggest there will be enough trading within a few weeks.
Book review: The First Word: The Search for the Origins of Language by Christine Kenneally
This book contains a few good ideas, but spends more time than I want discussing the personalities and politics that have been involved in the field.
It presents some good arguments against the “big bang” theory of the origin of human language (which suggests that one mutation may have created syntactic abilities that don’t correspond to anything in other species), mainly by presenting evidence that human language is not a monolithic feature, and that most aspects of it resemble features which can be seen in other species. For example, some of our syntactic ability involves reusing parts of the brain that provide motor control.
I’m uncertain whether the “big bang” theory she argues against is actually believed by any serious scholar, because those who may have advocated it haven’t articulated much of a theory (partly because they think there’s too little evidence to say much about the origin of language).
The most valuable idea I got from the book was the possibility that the development of human language may have been a byproduct of a sophisticated theory of mind. Other apes seem to get less benefit from communications because with only the limited theory of mind that a typical chimp has, there’s little that improved communication by one individual can do to increase cooperation between individuals.
I have implemented subsidies to encourage trading of some conditional prediction market contracts that may provide useful information about the consequences of the 2008 presidential election, via a simple automated market maker (using an algorithm described near the end of http://hanson.gmu.edu/ifextropy.html). The subsidized market maker ought to provide incentives for traders to devote more thought to these contracts than they would if the liquidity was less predictable.
Intrade has agreed not to charge any trading or expiry fees on these contracts.
Some places to look for extensive description of the motivations behind these subsidies are here and here.
The contracts are:
-
Oil Futures and PRESIDENT.DEM2008 prices will move in same direction on Election Day
This will use the change in the December 2011 Light Sweet Crude Oil futures
contract from the close before the election (Monday) to the close after the election (Wednesday). A price higher than 50 should suggest that a Democratic victory will cause oil prices to be higher than they otherwise would be, while a price below 50 should suggest that a Democratic victory will cause lower oil prices.
PRESIDENT.DEM2008 refers to the Intrade contract for "Democratic Party Candidate to Win 2008 Presidential Election". -
Treasury bond interest rate futures and PRESIDENT.DEM2008 prices will move in same direction on Election Day
This will use the change in the December 2008 30-year US Treasury Bond futures contract from the close before the election (Monday) to the close after the election (Wednesday). A price higher than 50 should suggest that a Democratic victory will cause bond prices to be higher (and long term interest rates lower) than they otherwise would be, while a price below 50 should suggest that a Democratic victory will cause lower bond prices (and long term interest rates higher) . - Number of US troops in Iraq on 30 June 2010 if a Democrat is elected president in 2008
- NONDEM.PRES-TROOPS.IRAQ: Number of US troops in Iraq on 30 June 2010 if a non-Democrat is elected president in 2008
These are scaled claims whose value will range from 0 if the troop levels are zero to 100 if the troop levels are 200,000 (or more).
- Increase in US Government debt if Democrat elected president in 2008
- Increase in US Government debt if non-Democrat is elected president in 2008
Note that the change in debt is usually quite different from what
is reported as the budget deficit. The debt numbers will be taken from a
source such as the
St. Louis Fed
Series GFDEBTN, Federal Government Debt
These are scaled claims whose value will range from 0 if the debt does not increase to 100 if the debt increases by $1 trillion (or more).
Please read the detailed specifications at Intrade before trading them, as one-line descriptions are not sufficient for you to fully understand them.
For the first two of those contracts, the market maker will enter bids and asks of 38 contracts, and can lose a maximum of $5187.76 on each contract. For the other four contracts, the market maker will enter bids and asks of 115 contracts, and can lose a maximum of $7906.25 on each contract.
I will maintain a web page here devoted to these contracts.
See also this more eloquent description on Overcoming Bias.